San Francisco Frontiers - US stocks edge higher while dollar dips after Moody's downgrade

Yields of US Treasury bonds spiked early in the day in a dynamic that revived talk of the "Sell America" narrative that unsettled markets in early April following President Donald Trump's sweeping tariff announcements.

But US Treasury yields subsequently eased as markets concluded that Moody's analysis contained no surprises.

After the knee-jerk reaction, "the market settles down and focuses on the economic fundamentals," said Subadra Rajappa, head of US rates strategy at Societe Generale.

The downgrade reflects serious concerns about the US' fiscal picture, but these were well known prior to the Moody's downgrade, Rajappa said.

All three major US indices finished with modest gains.

The dollar retreated somewhat against the euro and other major currencies. But the move was less substantial than during most volatile stretches earlier this year.

In comparison with that turbulent period, a closely-watched volatility index remained relatively stable on Monday. Stocks have rallied since Trump suspended many of his most onerous tariff measures.

Gold, seen as a safe haven investment, jumped more than one percent.

In Europe, London and Frankfurt erased early losses to close higher after UK and EU leaders reached a series of defense and trade accords at a landmark summit, the first since Britain's acrimonious exit from the European Union.

British Prime Minister Keir Starmer said leaders had agreed a "win-win" deal that his office said would add nearly £9 billion ($12 billion) to the British economy by 2040.

The euro, meanwhile, strengthened despite a cut to the eurozone's 2025 economic growth forecast due to global trade tensions sparked by Trump's tariffs.

The European Commission said the 20-country single currency area's economy should grow 0.9 percent in 2025 -- down from a previous forecast of 1.3 percent -- due to "a weakening global trade outlook and higher trade policy uncertainty".

"Underpinned by a robust labor market and rising wages, growth is expected to continue in 2025, albeit at a moderate pace," EU economy chief Valdis Dombrovskis said.

In company news, Walmart returned to the list of firms feeling a rollercoaster effect under Trump, after the US president slammed the retail giant for warning of price increases due to his tariffs.

Trump called on the company to "EAT THE TARIFFS" on social media, adding, "I'll be watching."

Walmart shares finished slightly lower on Monday.

- Key figures at around 2030 GMT -

New York - Dow: UP 0.3 percent at 42,792.07 (close)

New York - S&P 500: UP 0.1 percent at 5,963.60 (close)

New York - Nasdaq Composite: UP less than 0.1 percent at 19,104.28

London - FTSE 100: UP 0.2 percent at 8,699.31 (close)

Paris - CAC 40: FLAT at 7,883.63 (close)

Frankfurt - DAX: UP 0.7 percent at 23,934.98 (close)

Tokyo - Nikkei 225: DOWN 0.7 percent at 37,498.63 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 23,332.72 (close)

Shanghai - Composite: FLAT at 3,367.58 (close)

Euro/dollar: UP at $1.1244 from $1.1163 on Friday

Pound/dollar: UP at $1.3360 from $1.3283

Dollar/yen: DOWN at 144.87 yen from 145.70 yen

Euro/pound: UP at 84.14 pence from 84.04 pence

West Texas Intermediate: UP 0.3 percent at $62.69 per barrel

Brent North Sea Crude: UP 0.2 percent at $65.54 per barrel

burs-jmb/dw

C.Lewis--SFF